The finance departments within private equity funds are often very lean operations
and the number one seat is held by the CFO. But, how do you get that seat? And, what
does your day look like? To answer both questions, it probably makes sense to work backwards.
Head of Finance, Head of Operations, Head of Compliance, Head of IT, Head of HR, Investment Committee member, Company Secretary and Office Manager. Sound like eight different jobs? Wrong, it is actually the many hats that a typical CFO would wear. The CFO of a small fund, say under £1bn AUM will likely do everything other than investment. The CFO of a £10bn+ AUM fund will likely have a reasonable size team below them but will still have oversight of all of these functions. In a recent meeting with a CFO of one of the larger funds, she explained to me that she had just completed a large office move that took over two years to complete. This involved everything from identifying a suitable office space, to ordering the stationery. On that particular day, she had ordered pens, reviewed tax structures in multiple geographies, assisted with the setup of an overseas office, reviewed AIFMD documentation and performed carry waterfall calculations for a new fund, and of course, met me. This is a very typical day for a CFO; they literally have to be a Jack (or Jill) of all Trades.
So how do you get there? As most people will enter in to the finance department as a newly qualified accountant, you will likely have a good grasp of the numbers. It is important that you get as much exposure as you can in as many areas of the business as you can. If you are placed in to a fund accounting role, try to get exposure to the corporate and management accounting side. This will help with the step up to the financial controller position. From there, you can assist with transaction due diligence, investor relations reports, software implementation / improvement and keep up to date with regulatory aspects. It is likely the CFO will need to sign off the compliance reports but you can still offer to pull them together. Also aspire to become the go to person for the many advisory firms that a private equity house would typically use. Whilst it is not always possible to pick up these additional tasks and it may seem daunting on what is already a stressful job. The more you can do, the more valuable you will be to a fund that needs you to do all non-investment tasks and ultimately become CFO.
I often get asked by CFOs whether or not I feel they are suitably compensated. Compensation comes in three main parts; base, bonus and carry. There is obviously a number of variables, which need to be taken in to consideration, as there is not a one size fits all approach. Carry is a complicated amount to calculate and near impossible to bench mark accurately. The base and bonus is easier to bench mark. If we combine the two figures, the CFOs in the larger funds may well receive more than twice as much in total annual cash than those in the smaller funds. Fund size is the biggest single factor affecting compensation. The second is time in the role and as CFOs tend to stay for many years, there is real opportunity to develop both your career and your compensation.
Whether you are in the early stages of your career or currently a CFO seeking a new challenge, please do get in touch for a confidential conversation. I would love to help.